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Tax anti-avoidance measures will lead to more uncertainty

Freelancers might need to know that the government is committed to stamping out tax avoidance and on Monday, the Exchequer Secretary to the Treasury, David Gauke, announced some legislative changes designed to tackle the problem.

Two measures concerning the usage and treatment of loans and derivatives will take immediate effect whilst further details of another three measures will be set out shortly.

Some groups of companies have used intra-group loans or derivatives as a way of reducing the tax bill of the group. In other cases, companies have not fully recognised loans, derivatives and certain other amounts in their accounts. These instances are no longer allowable under the new changes.

The full details of the other three measures have yet to be released but they are designed to stop companies disguising remuneration, changing their accounting currency retrospectively and reducing VAT liability by artificially splitting the supply of services.

Gauke has also called for a study into a General Anti Avoidance Rule. The study will look at whether a GAAR would counter and deter tax avoidance, whilst still providing certainty, minimising costs and retaining an attractive business tax regime.

After the announcement, Will Morris from the CBI said that a GAAR would be in nobody's best interest as it would lead to uncertainty into the tax system and prove detrimental to the competitiveness of the UK in the global market.

Morris was not the only person to criticize the government's plan. James Bullock from McGrigors said that even if a GAAR was in place, the courts would still need to test many tax schemes because the transactions need to have taken place before HMRC can give them clearance.

One of the partners at Berwin Leighton Paisner said that the new anti-avoidance measures were harsh and would not restore confidence in the UK's tax framework, also pointed out that the government still has a long way to go before it lives up to its promise of providing the business community with a simple, stable and competitive tax system.

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